Definition
of 'Insurance'
A contract (policy) in which an
individual or entity receives financial protection or
reimbursement against losses from an insurance company. The company pools
clients' risks to make payments more affordable for the insured.
4 important types of Insurance
The origin of insurance is lost in
antiquity. The earliest traces of insurance in the ancient world are found in
the form of marine trade loans or carriers' contracts which: included an
element of insurance. Evidence is on record that arrangements embodying the
idea of insurance were made in Babylonia and India at quite an early period.
In Rig-Veda, the most sacred book of
India, references were made to the concept' Yogakshema' more or less akin to
the well-being and security of the people.
The codes of Hammurabi and of Manu
had recognized the advisability of provision for sharing the future losses.
However, there is no evidence that insurance in its present form was practiced
prior to the twelfth century.
Types of Insurance
1. Marine Insurance:
The marine insurance is the oldest
form of insurance. Under Bottom bond, the system of credit and the law of
interest were well-developed and were based on a clear appreciation of the
hazard involved and the means of safeguarding against it.
If the ship was lost, the loan and
interest were forfeited. The contract of insurance was made a part of the
contract of carriage, and Manu shows that Indians had even anticipated the
doctrine of average and contribution.
Freight was fixed according to
season and was expected to be reasonable in the case of marine transport which
was then very much at the mercy of winds and elements. Travelers by sea and land
were very much exposed to the risk of losing their vessels and merchandise
because the piracy on the open seas and highway robbery of caravans were very
common.
Besides there were several risks,
Many times, it might have been captured by the king's enemies or robbed by
pirates or got sunk in the deep waters.
The risk to owners of such ships
were enormous and, therefore, to safeguard them the marine traders devised a
method of spreading over them the financial loss which could not be
conveniently borne by the unfortunate individual victims.
The co-operative device was quite
voluntary in the beginning, but now in modern it has been converted into
modified shape of premium.
The marine policies of the present
forms were sold in the beginning of fourteenth century by the Brogans. On the
demand of the inhabitants of Burges, the Court of Flanders permitted in the
year 1310, the establishment in this Town of a charter of Assurance, by means
of which the merchants could insure their goods, exposed to the risks of the
sea.
The insurance development was not
confined to the Lombard's and to the Hansa merchants; it spread throughout
Spain, Portugal, France, Holland and England. The marine form land lending
prominence of Lombard's merchants got a prominent section of the London City.
They built homes there and took the
name of Lombard Street. Later on, this street became famous in insurance
history. The Lloyd's coffee-house gave an impetus to develop the marine
insurance.
2. Fire Insurance:
After marine insurance, fire
insurance developed in present form. It had been observed in Anglo- Section
Guild form for the first time where the victims of fire hazards were given
personal assistance by providing necessaries of life.
It had been originated in Germany in
the beginning of sixteenth century. The fire insurance got momentum in England
after the great fire in 1666 when the fire losses were tremendous.
About 85 per cent of the houses were
burnt to ashes and property worth of sterling ten crores were completely burnt
off. Fire Insurance Office was established in 1681 in England. With colonial
development of England, the fire insurance spread all over the world in present
form 'Sun Fire Office was successful fire insurance institution.
In India, the general insurer
started working since 1850 with the establishment of the Triton Insurance,
Calcutta. Again in 1861, the North British and Mercantile catered the
requirements of insurance business.
The general insurance in India could
not progress much. The slow growth of joint-stock enterprise and mechanised
production was another reason for the low level of general insurance business.
3. Life Insurance:
Life insurance made its first
appearance in England in sixteenth century, the first recorded evidence in
England being the policy on life of William Gibbons on June 18, 1653. Even
before this date annuities had become quite common in England, and marine
insurance had, in fact, made its appearance three thousand years ago.
The life insurance developed at
Exchange Alley. The first registered life office in England was the
Hand-in-Hand Society established in 1696. The famous Amicable Society for a
Perpetual Assurance Office started its operation since 1706.
Life insurance did not prosper in
the United States during the 18th century, because of serious fluctuations in
death-rate, but soon after 1800 some active interest began to be shown in this
enterprise because of the application of level premium plan which had by then
been in operation in U.K. for more than a generation.
In India, some Europeans started the
first life insurance company in Bengal Presidency, viz., the Orient Life
Assurance Company in 1818. The year 1870 was a year of a landmark in the
history of Indian Insurance separating the early period of pioneering attempts
at life insurance from the subsequent period of steady development at the
establishment of Indian Life Office, viz., Bombay Mutual Life Assurance Society
in 1871.
The next important life office was
Oriental Government Security Life Assurance Co., Ltd., which started its
operation since 1874. Since then several offices developed in India.
4. Miscellaneous Insurance:
The miscellaneous insurance took the
present shape at the later part of nineteenth century with the industrial
revolution in England. Accident insurance, fidelity insurance, liability
insurance and theft insurance were the important form of insurance at that
time.
Lloyds's Association was the main
functioning institution. Now, insurances such as cattle insurance, crop
insurance, profit insurance, etc., and are taking place. The scope of general
insurance is increasing with the advancement of the society.
